How to Spot a Binary Options Scam Broker - What Are Binaries

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Please note that all trading involves risk. Only risk
capital you're prepared to lose. Past performance does not guarantee future
results. This post is for educational purposes and should not be considered
as investment advice.

Are Binaries Investment a scam? (make your binary options safe)

First, the word must be said - binary options (BO) are a legitimate and a viable financial instrument and most BOs brokers are honest and reliable - however, there are a few bad apples out there that give others a bad name. So how can you avoid falling prey to a scammer? For starter you can choose a broker from our list of The 10 Best Brokers. This are honest and reliable brokers that were checked and confirmed to be trusted.

Want to look for another one? here is a simple strategy that will help you choose a good online brokerage firm: once you decided to trade with a new brokerage site, start small and watch for any irregularities in the behavior of its trading platform (see below). Trade with small amounts, test the waters first, once everything feels OK and you are more confident with the broker proceed with your planed amounts and strategy.

So, are BO safe? if you are trading with a reputable and honest broker it sure is.

Now, How can you spot a scamming broker? I'm going to reveal to you now how the scam works - once you now how it works it will be easy for you to identify it once it is tried on you.

In a typical scam the broker manipulate the movement of the underlying asset, usually upon the expiry time, in a way that the outcome will be in favor of the brokerage. For example, If the trade is supposed to expire at, say, 11h30 and at that time it was "in the money", the option is manipulated to remain open until, say, 11h31, and that last minute is just enough for your trade to expire 'out of the money'.

According to one of the traders that was a victim to the scam, the broker has a system where you place a trade and a clock begins to count down to the expiration, when the clock ticks to zero you should be awarded a win or suffer a loss - until here this is a standard binary options trade, but listen what happens next. After the clock ticks to zero, you see this, "Expiring...." for at least another 30 to 60 seconds. During that time, if your trade was close, the stocks move just enough for you to lose your money.

The scammer uses a trading platform where the trader has no way of having an exact time for the trade to expire because the clock goes to zero, but the broker keeps it open until it moves to where they get the investor's money.

Since this broker features the Reuters logo on its site, one of the complaining investors has been spoken with Reuters who has informed him that they are looking at opening a case against the scammer as he is a risk of being fraudulent and is using the Reuters name to big himself up.

Another complaining investor stated regarding the same system of scam: "... I noticed that the web site used to track my trades was having issues with the trades actually expiring 30 to 60 seconds after the time had run out to zero. During this extra expiry time is when the strike amounts would move and I would not be awarded my winnings if they moved just enough for me to lose. Then the site started slowing and freezing so that I could not see my trades, track anything, or see information regarding possible trades."

In addition to observing the expiry time behavior of the brokers' trading platform you should also examine the behavior of the broker's asset's price movements during the contracts' time frame. You want to make sure the broker's chart follows the market accurately. You do this by comparing the broker's chart movements to a real-time chart of the same asset.

In addition to observing the expiry time behavior of the trading platform you should also examine the behavior of the asset's price movements during the contracts' time frame. You want to make sure the platform's chart follows the market accurately. You do this by comparing the platforms's chart movements to a real-time chart of the same asset.

Now you know what to look for and how to identify an online brokerage site that uses scam techniques.

What are binaries

On a final note - there is one misconception about how brokers make money that needs to be cleared. Some traders voiced concerns that they are trading “against the house” thus the brokers have an incentive to alter the data towards favorable outcomes for them. Well, this is not the case, a honest one will derive his income from the difference between the total sum he pays to winning trades and the total sum that he gets from the losing trades.

Let's look at an example- this is simplified to make the point. Say there are only 2 trades, same asset, same time, same expiry time. One trader chooses 'Put' the other chooses 'Call'. Now the broker is indifferent as to what will be the outcome of the trade and which of the two traders win the trade, the broker's profit will come from the difference between what he gets from the loser and what he pays the winner.

You see, online brokerage sites have a viable business model that is not dependant on the outcome of the trades. That's not to say that there are not a few dishonest ones, like the one mentioned above, that are willing to defraud their customers for a dubious short term gain that will eventually cost them their business.

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